Pancaking the Pyramid Economy

In 1937, Ronald Coase gave economics
something new: a theory
for why companies should exist.
Oddly, this hadn't come up before. His paper was called "The Nature of
the Firm".
He
wrote it at age 27, as a class assignment in grad school. He based it
on a talk he gave at 22. It has since earned him a Nobel prize.

Says The Economist:

Mr Coase argued that firms make economic sense because they can reduce
or eliminate the "transaction cost" of going to the market by doing
things in-house. It is easier to co-ordinate decisions. At the time,
when communications were poor and economies of scale could be vast,
this justified keeping a lot of things inside a big firm, so car-makers
often owned engine-makers and other suppliers.

In that same piece (a 2013 obituary for Coase), The
Economist adds:

Mr Coase's theory of the firm would suggest that firms ought to be in
retreat at the moment, because technology is lowering transaction costs:
why go to the bother of organising things under one roof when the internet
lowers the cost of going to the market?

Perhaps that's why Hugh MacLeod (aka @gapingvoid)
in 2004 produced the cartoon shown in Figure 1 outlining his own model for
the firm.

Figure 1. Cartoon by Hugh MacLeod (aka @gapingvoid) from 2004 that outlines
his own model of the firm.

That same year, Hugh and I brainstormed the future of business for a
(now gone) open-source company we both consulted. As happens with Hugh,
this generated lots of great illustrations. Figure 2 shows Hugh's drawing of a
company like the one above, embodying what he called "egology".

Figure 2. Hugh MacLeod's drawing of a company embodying
"egology" from 2004.